Price rises in emerging markets are running ahead of those in the rich world
Although inflation rates in emerging markets tend to be higher and more volatile than those in advanced economies, they did generally decline between the 1970s and the 2010s, much like those in the rich world. The median inflation rate among emerging economies fell from 10.6% in 1995 to 5.4% in 2005 and 2.7% in 2015, thanks to efficiency-boosting developments like globalisation and improved macroeconomic policymaking. Theexpects consumer prices in emerging economies to rise by 5.
This happy state can be disturbed in a number of ways. Compromising the independence of the central bank is sometimes enough to make the temperature rise. Recep Tayyip Erdogan, Turkey’s president, has declared himself an enemy of interest earnings and leant on the central bank to reduce its benchmark rate, a step he claims will bring down inflation. Over the years he has sacked a number of central-bank officials, most recently three members of the bank’s monetary-policy committee in October.
Government spending in Brazil has surged since the onset of the pandemic. Jair Bolsonaro, the president, plans to extend relief payments despite roaring inflation. Worries about debt sustainability have reduced investors’ confidence, leading to falling asset prices and a weaker currency. Despite booming foreign demand for Brazil’s commodity exports, the real has tumbled by nearly 30% since the beginning of 2020.
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